Exploring Gender Dimensions in Tax Expenditures: Advancing Policy Debates and Informed Decision-making

Registration

The international dialogue on tax and development has been underscoring the need to assess the impact of policy measures on gender equality. In the context of tax systems, this mainly covers understanding the impact of ‘explicit’ and ‘implicit’ gender biases. ‘Explicit biases’, less common in the context of developing countries, come as a result of intentional policy choices which treat women and men differently. Differentiated statutory treatment of women and men with respect to tax rates, deductions, tax credits, etc. are some examples. While reforming explicit biases is relatively straight forward, grasping implicit biases in tax systems is complex.

This is so because their effect materialises as externalities when the application of seemingly gender-neutral tax rules interact with existing societal and gender roles, economic behaviour, labor market structures, and so forth. Typical instances of implicit gender biases are observed in the application of personal income taxes (PIT) and value added tax (VAT). Considering their complex nature and wider potential impact, implicit biases should, hence, be put at the heart of current attempts that try to understand the gender impact of tax systems.

Tax expenditures (TEs) are government revenue forgone through tax exemptions, deductions, credits, deferrals, preferential tax rates, etc. TEs are a counterpart to direct expenditures.

Tax expenditures (TEs), as an important channel through which both explicit and implicit biases come to being, is one critical area of engagement that can enrich ongoing efforts. While TEs with explicit gender biases are limited in number, various countries have been adopting gender favorable TEs, exemplified by tax exemptions on essential commodities or activities that disproportionately impact women. Initiatives like tax reductions and tax-free thresholds for female-owned start-ups and small and medium-sized enterprises signify efforts to promote gender equality through fiscal policies. As the impact of TEs in developed and developing countries would differ due to differences in economic behaviors and labor markets, it is important to follow a tailored approach – e.g., PIT related TEs will benefit women less in developing countries as women largely participate in the informal economy. Although some countries are using TEs to improve gender equality, much remains unstudied, necessitating a more comprehensive approach to measure the gender impact of TEs.

The attempt to understand the gender impact of tax systems is challenged by several factors including the absence of gender-disaggregated data, further affected by the limited institutional capacity of countries to conduct such estimation. Data collection and evaluation, undoubtedly, play a central role and remain the main hurdles for the broader area of tax and gender. As pointed out by a researcher in the area, the case of TE related gender data and evaluation is scarce. Redonda et al. (2023) highlight that out of the 105 countries with a publicly available TE report, only 16 referred to, included an evaluation, or a summary in their report. Canada is one of the only two countries that undertook a gender-based evaluation. Since 2019, Canada published an analysis of the gender impact of PIT-related exemptions in its annual TE reports. These make the case for increased engagement on the topic to draw special attention to the collection and analysis of gender disaggregated tax and economic data and to accordingly support developing countries.

The side event

The forthcoming ATI side-event will aim to deepen the understanding of TEs' impact on gender dynamics, emphasising their role in advancing gender equality. By spotlighting country experiences in the application of gender favorable TEs and the use of gender disaggregated data, the event seeks to underscore the significance of gender analysis in policy making, echoing the transformative potential of gender-sensitive fiscal policies in fostering inclusive socio-economic development.

The panel discussion will be joined by experts from the tax and development arena, together with country representatives. A ‘Meet the speakers’ brochure will be available soon.

For more information, please visit the 2024 ATI General Assembly event site.